The Middle East: A revolution against neoliberalism?

On February 16th I read a comment was posted on the wall of the Kullina Khalid Saed (“We are all Khaled Said”) Facebook page administered by the now very famous Wael Ghonim. By that time it had been there for about 21 hours. The comment referred to a news item reporting that European governments were under pressure to freeze bank accounts of recently deposed members of the Mubarak regime. The comment said: “Excellent news … we do not want to take revenge on anyone … it is the right of all of us to hold to account any person who has wronged this nation. By law we want the nation’s money that has been stolen … because this is the money of Egyptians, 40% of whom live below the poverty line.”

By the time I unpacked this thread of conversation, 5,999 people had clicked the “like” button, and about 5,500 had left comments. I have not attempted the herculean task of reading all five thousand odd comments (and no doubt more are being added as I write), but a fairly lengthy survey left no doubt that most of the comments were made by people who clicked the “like” icon on the Facebook page. There were also a few by regime supporters, and others by people who dislike the personality cult that has emerged around Mr. Ghoneim.

This Facebook thread is symptomatic of the moment. Now that the Mubarak regime has fallen, an urge to account for its crimes and to identify its accomplices has come to the fore. The chants, songs, and poetry performed in Midan al-Tahrir always contained an element of anger against haramiyya (thieves) who benefited from regime corruption. Now lists of regime supporters are circulating in the press and blogosphere. Mubarak and his closest relatives (sons Gamal and ‘Ala’) are always at the head of these lists. Articles on their personal wealth give figures as low as $3 billion to as high as $70 billion (the higher number was repeated on many protesters’ signs). Ahmad Ezz, the General Secretary of the deposed National Democratic Party and the largest steel magnate in the Middle East, is supposed to be worth $18 billion; Zohayr Garana, former Minister of Tourism, $13 billion; Ahmad al-Maghrabi, former Minister of Housing, $11 billion; former Minister of Interior Habib Adli, much hated for his supervision of an incredibly abusive police state, also managed to amass $8 billion — not bad for a lifetime civil servant.

Such figures may prove to be inaccurate. They may be too low, or maybe too high, and we may never know precisely because much of the money is outside of Egypt, and foreign governments will only investigate the financial dealings of Mubarak regime members if the Egyptian government makes a formal request for them to do so. Whatever the true numbers, the corruption of the Mubarak regime is not in doubt. The lowest figure quoted for Mubarak’s personal wealth, of “only” $3 billion, is damning enough for a man who entered the air force in 1950 at the age of twenty two, embarking on a sixty-year career in “public service.”

A systemic problem

The hunt for regime cronies’ billions may be a natural inclination of the post-Mubarak era, but it could also lead astray efforts to reconstitute the political system. The generals who now rule Egypt are obviously happy to let the politicians take the heat. Their names were not included in the lists of the most egregiously corrupt individuals of the Mubarak era, though in fact the upper echelons of the military have long been beneficiaries of a system similar to (and sometimes overlapping with) the one that that enriched civilian figures much more prominent in the public eye such as Ahmad Ezz and Habib al-Adly.

Despite macroeconomic gains, tens of millions of Egyptians still live in poverty [EPA]

To describe blatant exploitation of the political system for personal gain as corruption misses the forest for the trees. Such exploitation is surely an outrage against Egyptian citizens, but calling it corruption suggests that the problem is aberrations from a system that would otherwise function smoothly. If this were the case then the crimes of the Mubarak regime could be attributed simply to bad character: change the people and the problems go away. But the real problem with the regime was not necessarily that high-ranking members of the government were thieves in an ordinary sense. They did not necessarily steal directly from the treasury. Rather they were enriched through a conflation of politics and business under the guise of privatization. This was less a violation of the system than business as usual. Mubarak’s Egypt, in a nutshell, was a quintessential neoliberal state.

What is neoliberalism? In his Brief History of Neoliberalism, the eminent social geographer David Harvey outlined “a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterised by strong private property rights, free markets, and free trade.” Neoliberal states guarantee, by force if necessary, the “proper functioning” of markets; where markets do not exist (for example, in the use of land, water, education, health care, social security, or environmental pollution), then the state should create them.

Guaranteeing the sanctity of markets is supposed to be the limit of legitimate state functions, and state interventions should always be subordinate to markets. All human behavior, and not just the production of goods and services, can be reduced to market transactions.

And the application of utopian neoliberalism in the real world leads to deformed societies as surely as the application of utopian communism did.

Rhetoric vs. reality

Two observations about Egypt’s history as a neoliberal state are in order. First, Mubarak’s Egypt was considered to be at the forefront of instituting neoliberal policies in the Middle East (not un-coincidentally, so was Ben Ali’s Tunisia). Secondly, the reality of Egypt’s political economy during the Mubarak era was very different than the rhetoric, as was the case in every other neoliberal state from Chile to Indonesia. Political scientist Timothy Mitchell published a revealing essay about Egypt’s brand of neoliberalism in his book Rule of Experts (the chapter titled “Dreamland” — named after a housing development built by Ahmad Bahgat, one of the Mubarak cronies now discredited by the fall of the regime). The gist of Mitchell’s portrait of Egyptian neoliberalism was that while Egypt was lauded by institutions such as the International Monetary Fund as a beacon of free-market success, the standard tools for measuring economies gave a grossly inadequate picture of the Egyptian economy. In reality the unfettering of markets and agenda of privatization were applied unevenly at best.

The only people for whom Egyptian neoliberalism worked “by the book” were the most vulnerable members of society, and their experience with neoliberalism was not a pretty picture. Organised labor was fiercely suppressed. The public education and the health care systems were gutted by a combination of neglect and privatization. Much of the population suffered stagnant or falling wages relative to inflation. Official unemployment was estimated at approximately 9.4% last year (and much higher for the youth who spearheaded the January 25th Revolution), and about 20% of the population is said to live below a poverty line defined as $2 per day per person.

For the wealthy, the rules were very different. Egypt did not so much shrink its public sector, as neoliberal doctrine would have it, as it reallocated public resources for the benefit of a small and already affluent elite. Privatization provided windfalls for politically well-connected individuals who could purchase state-owned assets for much less than their market value, or monopolise rents from such diverse sources as tourism and foreign aid. Huge proportions of the profits made by companies that supplied basic construction materials like steel and cement came from government contracts, a proportion of which in turn were related to aid from foreign governments.

Most importantly, the very limited function for the state recommended by neoliberal doctrine in the abstract was turned on its head in reality. In Mubarak’s Egypt business and government were so tightly intertwined that it was often difficult for an outside observer to tease them apart. Since political connections were the surest route to astronomical profits, businessmen had powerful incentives to buy political office in the phony elections run by the ruling National Democratic Party. Whatever competition there was for seats in the Peoples’ Assembly and Consultative Council took place mainly within the NDP. Non-NDP representation in parliament by opposition parties was strictly a matter of the political calculations made for a given elections: let in a few independent candidates known to be affiliated with the Muslim Brotherhood in 2005 (and set off tremors of fear in Washington); dictate total NDP domination in 2010 (and clear the path for an expected new round of distributing public assets to “private” investors).

Parallels with America

The political economy of the Mubarak regime was shaped by many currents in Egypt’s own history, but its broad outlines were by no means unique. Similar stories can be told throughout the rest of the Middle East, Latin America, Asia, Europe and Africa. Everywhere neoliberalism has been tried, the results are similar: living up to the utopian ideal is impossible; formal measures of economic activity mask huge disparities in the fortunes of the rich and poor; elites become “masters of the universe,” using force to defend their prerogatives, and manipulating the economy to their advantage, but never living in anything resembling the heavily marketised worlds that are imposed on the poor.

Unemployment was a major grievance for millions of Egyptian protesters [EPA]

The story should sound familiar to Americans as well. For example, the vast fortunes of Bush era cabinet members Donald Rumsfeld and Dick Cheney, through their involvement with companies like Halliburton and Gilead Sciences, are the product of a political system that allows them — more or less legally — to have one foot planted in “business” and another in “government” to the point that the distinction between them becomes blurred. Politicians move from the office to the boardroom to the lobbying organization and back again.

As neoliberal dogma disallows any legitimate role for government other than guarding the sanctity of free markets, recent American history has been marked by the steady privatization of services and resources formerly supplied or controlled by the government. But it is inevitably those with closest access to the government who are best positioned to profit from government campaigns to sell off the functions it formerly performed. It is not just Republicans who are implicated in this systemic corruption. Clinton-era Secretary of Treasury Robert Rubin’s involvement with Citigroup does not bear close scrutiny. Lawrence Summers gave crucial support for the deregulation of financial derivatives contracts while Secretary of Treasury under Clinton, and profited handsomely from companies involved in the same practices while working for Obama (and of course deregulated derivatives were a key element in the financial crisis that led to a massive Federal bailout of the entire banking industry).

So in Egyptian terms, when General Secretary of the NDP Ahmad Ezz cornered the market on steel and was given contracts to build public-private construction projects, or when former Minister of Parliament Talaat Mustafa purchased vast tracts of land for the upscale Madinaty housing development without having to engage in a competitive bidding process (but with the benefit of state-provided road and utility infrastructure), they may have been practicing corruption logically and morally. But what they were doing was also as American as apple pie, at least within the scope of the past two decades.

However, in the current climate the most important thing is not the depredations of deposed Mubarak regime cronies. It is rather the role of the military in the political system. It is the army that now rules the country, albeit as a transitional power, or so most Egyptians hope. No representatives of the upper echelons of the Egyptian military appear on the various lists of old-regime allies who need to be called to account. For example, the headline of the February 17th edition of Ahrar, the press organ of the Liberal party, was emblazoned with the headline “Financial Reserves of the Corrupt Total 700 Billion Pounds [about $118 billion] in 18 Countries.”

A vast economic powerhouse

But the article did not say a single word about the place of the military in this epic theft. The military were nonetheless part of the crony capitalism of the Mubarak era. After relatively short careers in the military high-ranking officers are rewarded with such perks as highly remunerative positions on the management boards of housing projects and shopping malls. Some of these are essentially public-sector companies transferred to the military sector when IMF-mandated structural adjustment programs required reductions in the civilian public sector.

But the generals also receive plums from the private sector. Military spending itself was also lucrative because it included both a state budget and contracts with American companies that provided hardware and technical expertise. The United States provided much of the financing for this spending under rules that required a great deal of the money to be recycled to American corporations, but all such deals required middlemen. Who better to act as an intermediary for American foreign aid contracts than men from the very same military designated as the recipient of the services paid for by this aid? In this respect the Egyptian military-industrial complex was again stealing a page from the American playbook; indeed, to the extent that the Egyptian military benefited from American foreign aid, Egypt was part of the American military-industrial complex, which is famous for its revolving-door system of recycling retired military men as lobbyists and employees of defense contractors.

Consequently it is almost unthinkable that the generals of the Supreme Military Council will willingly allow more than cosmetic changes in the political economy of Egypt. But they could be compelled to do so unwillingly. The army is a blunt force, not well suited for controlling crowds of demonstrators. The latest statement of the Supreme Military Council reiterated both the legitimacy of the pro-democracy movements demands, and the requirement that demonstrations cease so that the country can get back to work. If demonstrations continue to the point that the Supreme Military Council feels it can no longer tolerate them, then the soldiers who will be ordered to put them down (indeed, in some accounts were already ordered to put them down early in the revolution and refused to do so) with deadly force, are not the generals who were part of the Mubarak-era corruption, but conscripts.

Pro-democracy demonstrators and their sympathisers often repeated the slogans “the army and the people are one hand,” and “the army is from us.” They had the conscripts in mind, and many were unaware of how stark differences were between the interests of the soldiers and the generals. Between the conscripts and the generals is a middle-level professional officer corps whose loyalties have been the subject of much speculation. The generals, for their part, want to maintain their privileges, but not to rule directly. Protracted direct rule leaves the officers of the Supreme Military Council vulnerable to challenges from other officers who were left on the outside. Also, direct rule would make it impossible to hide that the elite officers are not in fact part of the “single hand” composed of the people and the (conscript) army. They are instead logically in the same camp as Ahmad Ezz, Safwat al-Sharif, Gamal Mubarak, and Habib al-Adly — precisely the names on those lists making the rounds of regime members and cronies who should face judgment.

Ultimately the intense speculation about how much money the Mubarak regime stole, and how much the people can expect to pump back into the nation, is a red herring. If the figure turns out to be $50 billion or $500 billion, it will not matter, if Egypt remains a neoliberal state dedicated (nominally) to free-market fundamentalism for the poor, while creating new privatised assets that can be recycled to political insiders for the rich. If one seeks clues to how deeply the January 25th Revolution will restructure Egypt, it would be better to look at such issues as what sort of advice the interim government of generals solicits in fulfilling its mandate to re-make Egyptian government. The period of military government probably will be as short as advertised, followed, one hopes, by an interim civilian government for some specified period (at least two years) during which political parties are allowed to organise on the ground in preparation for free elections. But interim governments have a way of becoming permanent.

Technocrats or ideologues?

One sometimes hears calls to set up a government of “technocrats” that would assume the practical matters of governance. “Technocrat” sounds neutral — a technical expert who would make decisions on “scientific” principle. The term was often applied to Yusuf Butros Ghali, for example, the former Minister of the Treasury, who was one of the Gamal Mubarak boys brought into the cabinet in 2006 ostensibly to smooth the way for the President’s son to assume power. Ghali is now accused of having appropriated LE 450 million for the use of Ahmad Ezz.

I once sat next to Ghali at a dinner during one of his trips abroad, and had the opportunity to ask him when the Egyptian government would be ready to have free elections. His response was to trot out the now discredited regime line that elections were impossible because actual democracy would result in the Muslim Brotherhood taking power. Conceivably Ghali will beat the charge of specifically funneling the state’s money to Ahmad Ezz. But as a key architect of Egypt’s privatization programs he cannot possibly have been unaware that he was facilitating a system that enabled the Ezz steel empire while simultaneously destroying Egypt’s educational and health care systems.

The Egyptian army controls a range of businesses, ranging from factories to hotels [EPA]

The last time I encountered the word “technocrat” was in Naomi Klein’s book The Shock Doctrine — a searing indictment of neoliberalism which argues that the free-market fundamentalism promoted by economist Milton Friedman (and immensely influential in the United States) is predicated on restructuring economies in the wake of catastrophic disruptions because normally functioning societies and political systems would never vote for it. Disruptions can be natural or man-made, such as … revolutions.

The chapters in The Shock Doctrine on Poland, Russia, and South Africa make interesting reading in the context of Egypt’s revolution. In each case when governments (communist or apartheid) collapsed, “technocrats” were brought in to help run countries that were suddenly without functional governments, and create the institutional infrastructure for their successors. The technocrats always seemed to have dispensed a form of what Klein calls “shock therapy” — the imposition of sweeping privatization programs before dazed populations could consider their options and potentially vote for less ideologically pure options that are in their own interests.

The last great wave of revolutions occurred in 1989. The governments that were collapsing then were communist, and the replacement in that “shock moment” of one extreme economic system with its opposite seemed predictable and to many even natural.

One of the things that make the Egyptian and Tunisian revolutions potentially important on a global scale is that they took place in states that were already neoliberalised. The complete failure of neoliberalsm to deliver “human well-being” to a large majority of Egyptians was one of the prime causes of the revolution, at least in the sense of helping to prime millions of people who were not connected to social media to enter the streets on the side of the pro-democracy activists.

But the January 25th Revolution is still a “shock moment.” We hear calls to bring in the technocrats in order to revive a dazed economy; and we are told every day that the situation is fluid, and that there is a power vacuum in the wake of not just the disgraced NDP, but also the largely discredited legal opposition parties, which played no role whatsoever in the January 25th Revolution. In this context the generals are probably happy with all the talk about reclaiming the money stolen by the regime, because the flip side of that coin is a related current of worry about the state of the economy. The notion that the economy is in ruins — tourists staying away, investor confidence shattered, employment in the construction sector at a standstill, many industries and businesses operating at far less than full capacity — could well be the single most dangerous rationale for imposing cosmetic reforms that leave the incestuous relation between governance and business intact.

Or worse, if the pro-democracy movement lets itself be stampeded by the “economic ruin” narrative, structures could be put in place by “technocrats” under the aegis of the military transitional government that would tie the eventual civilian government into actually quickening the pace of privatization. Ideologues, including those of the neoliberal stripe, are prone to a witchcraft mode of thinking: if the spell does not work, it is not the fault of the magic, but rather the fault of the shaman who performed the spell. In other words, the logic could be that it was not neoliberalism that ruined Mubarak’s Egypt, but the faulty application of neoliberalism.

Trial balloons for this witchcraft narrative are already being floated outside of Egypt. The New York Times ran an article on February 17th casting the military as a regressive force opposed to privatization and seeking a return to Nasserist statism. The article pits the ostensibly “good side” of the Mubarak regime (privatization programs) against bad old Arab socialism, completely ignoring the fact that while the system of military privilege may preserve some public-sector resources transferred from the civilian economy under pressure of IMF structural adjustment programs, the empire of the generals is hardly limited to a ring-fenced quasi-underground public sector.

Officers were also rewarded with private-sector perks; civilian political/business empires mixed public and private roles to the point that what was government and what was private were indistinguishable; both the military and civilians raked in rents from foreign aid. The generals may well prefer a new round of neoliberal witchcraft. More privatization will simply free up assets and rents that only the politically connected (including the generals) can acquire. Fixing a failed neoliberal state by more stringent applications of neoliberalism could be the surest way for them to preserve their privileges.

A neoliberal fix would, however, be a tragedy for the pro-democracy movement. The demands of the protesters were clear and largely political: remove the regime; end the emergency law; stop state torture; hold free and fair elections. But implicit in these demands from the beginning (and decisive by the end) was an expectation of greater social and economic justice. Social media may have helped organise the kernel of a movement that eventually overthrew Mubarak, but a large element of what got enough people into the streets to finally overwhelm the state security forces was economic grievances that are intrinsic to neoliberalism. These grievances cannot be reduced to grinding poverty, for revolutions are never carried out by the poorest of the poor. It was rather the erosion of a sense that some human spheres should be outside the logic of markets. Mubarak’s Egypt degraded schools and hospitals, and guaranteed grossly inadequate wages, particularly in the ever-expanding private sector. This was what turned hundreds of dedicated activists into millions of determined protestors.

If the January 25th revolution results in no more than a retrenchment of neoliberalism, or even its intensification, those millions will have been cheated. The rest of the world could be cheated as well. Egypt and Tunisia are the first nations to carry out successful revolutions against neoliberal regimes. Americans could learn from Egypt. Indeed, there are signs that they already are doing so. Wisconsin teachers protesting against their governor’s attempts to remove the right to collective bargaining have carried signs equating Mubarak with their governor. Egyptians might well say to America ‘uqbalak (may you be the next).

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